ERIC
PIERCE: The biotech bull hits the five-year mark. CEOs now have money. What are
they going to do with it? I'm Eric Pierce. Welcome to BioCentury This Week's
Quarterly Financial Report.

NARRATOR:
Connecting patients, scientists, innovators, and policymakers to the future of
medicine. BioCentury This Week.

ERIC
PIERCE: Happy birthday to the biotech bull. It's been five years since the
biotech market picked itself off the floor in March of 2009. By almost any
measure, the innovative life science space has refinanced itself. All told,
over those five years, biotechs have raised more than $150 billion on US stock
exchanges.

In
the last two years alone, more than 80 companies have gone public in the US.
But while many of these fresh IPOs are new to the average investor, many of
their CEOs spent years surviving in the financing wilderness. How did they keep
their companies and their innovations alive?

Today,
we'll hear the story of three CEOs who took their companies public during the
biotech bull. We'll find out what lessons they learned and what changed their
fortunes with investors. And how will they create value with their new shareholder
cash? And for our public policy audience, we'll ask whether the JOBS Act and
the new climate at the FDA helped pave the way to Wall Street.

Today,
I'm pleased to welcome our panel of CEOs. Tim Mayleben of Esperion
Therapeutics, which is developing a new treatment for high cholesterol; Scott
Koenig of MacroGenics, which has a late-stage product for gastric cancer; and
Jeff Abbey of Argos Therapeutics, which is in the hot immunotherapy space with
a candidate for kidney cancer.

Scott,
I'd like to start with you. We're talking about companies that made it through
the wilderness, when financing was tough, venture capitalists didn't have a lot
of new money to spend. Your company, MacroGenics, was founded in 2000, and you
always had the fully-integrated model which, for a long time, wasn't
necessarily in vogue. How did you make it through the wilderness?

SCOTT
KOENIG: Absolutely true. Summer of 2008 is a good story. We wanted to stick
with our vision to develop innovative medicines using our next generation antibody
technologies, but still maintain a fully-integrated development infrastructure.

We
at that time wanted to acquire a company. Raven Biotechnology Companies, which
had started in 1999, had developed some stem cell technologies, and they had a
large portfolio of antibodies, which we thought fit very nicely with our
technology platform. We saw this as a way to forward integrate and accelerate
the development of our product opportunities.

The
majority of our investors and our board were resistant were to this idea. They
wanted us to focus in on our lead product candidate, which was in Phase III
development, which we had acquired a few years before. I was very resistant to
the idea. I did not want this company to ultimately be successful or fail by a
single event.

So
with a lot of coaxing and a lot of discussion, we came to an agreement. I could
say, not uniformly.

ERIC
PIERCE: A gentleman's agreement?

SCOTT
KOENIG: It was a gentleman's agreement. One week after Lehman went down we were
able to be successful.

ERIC
PIERCE: Able to get it done.

SCOTT
KOENIG: And able to get it done.

ERIC
PIERCE: I mean, Jeff, you know, things don't always go as you plan with
biotech. You actually had lost a partner to M&A. Talk a little bit about
that experience and what you did to get yourself out of it.

JEFF
ABBEY: Yeah, Argos has been around actually slightly longer than MacroGenics,
so it's been a roller coaster ride. And that's a perfect example. We were lucky
enough to obtain a partner in Kirin Pharmaceuticals, the subsidiary of Kirin
Brewery, in 2004, and co-funded our development of most of our products
together, basically a virtual joint venture.

Into
2009, we were in our Phase II trial in 2009, developing the kidney cancer
product that we have today. And they merged with Kyowa Hakko, another Japanese
company. And Kyowa Hakko management was calling the shots following the merger.
And they went through the two portfolios, and the Kyowa Hakko team decided they
didn't want to do personalized immunotherapy anymore. And so they pulled out in
the middle of -- and this is 2009 -- and here we lose --

ERIC
PIERCE: Not a great time to be partnerless.

JEFF
ABBEY: Similar to when Scott was trying to raise money. And so we needed to
raise money without a partner. And it was an extremely difficult time. But
everything worked out in the end. But there were some tough years, for sure.

ERIC
PIERCE: But you survived. So, Tim, you have sort of a different story with
Esperion. Talk a little bit about the first version and then also where you're
at right now.

TIM
MAYLEBEN: Sure. So Esperion Therapeutics was originally founded in 1998 by my
colleague Roger Newton. And he and I have adapted a tandem leadership style for
Esperion, both the original Esperion and this, he on the medical and clinical
side or scientific side and me on the business and operations side. So we were
funded during one of the booms in biotech. And all together, we raised about
$200 million together.

Ultimately
Pfizer acquired the business in 2004. And we became part of Pfizer. But in
2006, Pfizer ran into some difficulties with their cardiovascular portfolio and
decided to get out of cardiovascular R&D. And Roger saw an opportunity to
get some of the assets from the original Esperion back. So in 2008, we were
able to get the assets back. And with the help of some supportive venture
capital investors, restarted the company, and over the last several years have
raised almost the same amount of money and recently went public as well.

ERIC
PIERCE: So Esperion 2.0 is now live and launched. And we'll come back to a
little bit more of that and dig deeper into the business plans and how you guys
are moving forward when we come back. Next, we'll talk about how their
companies' fortunes changed. But first, let's take a look at the total biotech
IPO market performance since 2013.

SEGMENT 2

NARRATOR:
You're watching BioCentury This Week.

ERIC
PIERCE: We're talking with CEOs Tim Mayleben, Scott Koenig, and Jeff Abbey
about navigating their company to the public markets. So Scott and Jeff, you
guys successfully tapped the public IPO markets recently. But it wasn't your
first go at the IPO. Scott, I'd like to talk about your first try and what
happened internally and also externally.

SCOTT
KOENIG: Well, we actually -- this was our real first try at doing an IPO. We
obviously, over the history of the company, thought of different ways of
financing the company. But in fact, the market between mid-2000 to 2013 was not
receptive to the concept of an IPO. I think most of the investors were trying
to push for acquisitions of companies as a way of achieving liquidity.

ERIC
PIERCE: More of an M&A route.

SCOTT
KOENIG: More of an M&A route. So the opportunity opened up in 2013. Both
the market conditions changed, as well as we had matured the company, the
vision of the company we stayed with. We had developed all these technologies.
We had multiple products in clinical development. We had these validating
partnerships that brought in a significant amount of nondilutive capital to the
company. And we are off and going. And so there was also in interest instead of
just product opportunities, a strong interest in next generation platforms. And
this resonated very well with the market.

ERIC
PIERCE: So investors, for a long time, weren't funding pipeline. Sort of a
change in tack for investors, moving into further funding pipeline products and
moving downstream. I mean, Jeff, one of the things that's interesting is
companies -- you see these IPO proceeds. It's a good chunk of money certainly.
But that's not all the money that these companies raise. Scott, you mentioned
the nondilutive capital. You guys have been pretty successful not only in
nondilutive capital, but you also have an interesting IPO story as well.

JEFF
ABBEY: Well, we actually did test the market in early 2012. So when our
partnership with Kirin ended, we finished the Phase II. We had great data, and
we wanted to move straight to Phase III, which is the last trial before FDA
approval, hopefully. And you need a lot of money to run a Phase III trial, as
everybody knows.

And
so we figured the best way to do that was to try to go public. And this was
going into early 2012, when was very difficult to get public, as Scott just
mentioned. And especially, at a time where we hadn't started the Phase III
trial yet. We were just planning it. And it's a trial in kidney cancer, as you
mentioned. We were looking at survival as the endpoint.

So
it takes a long time, and investors don't like to wait that long for major
milestones. So we pulled back, and we decided to do another private financing.
We actually did two private financings, raised a total of almost $75 million in
those private financings, started the Phase III trial. And then when the
markets became more receptive to IPOs, we then tapped the IPO market just over
a month ago actually.

ERIC
PIERCE: And also in the first go-around, there was another company, Dendreon
that had maybe not a similar technology, but from a broad landscape was
basically really the first immunotherapy that was approved.

JEFF
ABBEY: Yeah, so that definitely impacted us at the time, and still does quite
frankly. It's improved therapy, and it's for prostate cancer. It's really a
partially personalized therapy, unlike ours that's fully personalized. But for
lack of any other comparator, that's what investors certainly see as comparing
to us. And as you mentioned, Dendreon was looked favorably for a time with a
large market cap after they got approved. Then, of course, biotech is different
in that you're valued on your potential, until you get approved. And then
you're valued on revenue and profits, like everybody else.

ERIC
PIERCE: What can you do next? And Tim, it wasn't always easy sledding for
Esperion either. Talk a little bit about your B round and the challenges there,
just given what the general marketplace.

TIM
MAYLEEN: No, that's right. So in the 2011, 2012 time frame, we were still in
Phase 1, starting Phase IIa studies and didn't have the Phase II validating
results. And of course, the market says, as the other guys have suggested, were
really tough then. Fewer investors, fewer investors making new investments.
They were tending to invest in their own portfolio companies. So we had a
challenge finding a new investor to lead that round. We were finally able to do
that in early 2013 and then leverage that experience or that mezzanine round to
really do the IPO in the middle part of the year. But I think key to the
success there was the fact that -- I mentioned Roger Newton earlier -- Roger
and I had worked together very successfully at the first Esperion. We were
operating this huge therapeutic space, which is LDL cholesterol lowering, which
analysts estimate is this $20 to $50 billion market. And we have a oral,
once-daily, small molecule to lower LDL cholesterol. And it was really Phase II
results that came out at the end of 2012 that really launched us into all of
that.

ERIC
PIERCE: What was the toughest decision or the scariest moment for you as a CEO,
Tim?

TIM
MAYLEBEN: Yes, so Eric, I think the scariest moment for me is always that time
between when you tell people what you're going to do -- in this case, usually
raising money, attracting additional funding -- and the time until you actually
close the funding on the terms that you hope to be able to close it. And
repeatedly, that is the scariest time because you've made commitments. You've
told your colleagues this is what we're going to do. And now you've got to
deliver on that. And there's always that moment of pause, hesitation.

ERIC
PIERCE: Or have I overpromised?

TIM
MAYLEBEN: Overpromised. Exactly. So that is a recurring theme, I think, in
biotech for me.

ERIC
PIERCE: Scott?

SCOTT
KOENIG: Yep, for us, it was October 2010. We were opening the envelope on a
Phase III study, and it didn't go the way we wanted it to go. A couple weeks
later, we heard from our partner that they were giving the rights back to the
molecule. As you recall, we wanted to execute on our vision to be a
fully-integrated biotech company and develop the new product opportunities. And
we didn't have the cash runway to move that forward.

And
obviously it was both fear and sadness at the time, because there was a lot of
expectations from the patients and their parents.

ERIC
PIERCE: And a lot of people at the company, I'm sure, worked really hard.

SCOTT
KOENIG: And absolutely. A lot of the people in the company put a lot of effort
to get this over the finish line. At that time, we were negotiating two deals
from our pipeline. And if we were successful, it didn't matter to us if we took
a little longer. But we negotiated to the last minute.

And
we were fortunate one week later to be able to announce two deals. And this was
really -- people perceived this as the launch of the company again. But in
fact, this was our plan all along to really develop this fully-integrated
company and have these assets that we could develop at that time.

ERIC
PIERCE: Good lesson to keep the pipeline well-stocked.

SCOTT
KOENIG: Absolutely.

ERIC
PIERCE: Jeff?

JEFF
ABBEY: Yes, so a specific example related to Tim, which I think is true. We
launched our Phase III trial, knowing we didn't have enough money to complete
it. So promising employees that we were going to finish this trial. Patients,
investigators, all of these promises that you make to run a large Phase III
trial, and knowing that you have very limited cash on hand and not enough to
complete it. So we were able to raise the money that we needed and keep the
trial going and it all worked out in the end but it was definitely a scary
moment.

ERIC
PIERCE: Well, now that we have our CEO's in money, how will they create value
for their Investors? More in a moment.

SEGMENT 3

NARRATOR:
Now, back to BioCentury This Week.

ERIC
PIERCE: We're talking with CEOs, Tim Mayleben, Scott Koenig, and Jeff Abbey
about navigating their company to the IPO markets. So you guys have
successfully tapped the IPO markets. Investors have given you capital to spend.
Now the fun starts.

How
are you going spend it, Tim?

TIM
MAYLEBEN: We're spending it mostly on clinical trials and of course, on a very
talented and experienced group of drug developers. But for us, investors expect
us to say what we're going to do, make sure we're clear about that, and then
deliver on that, do actually what we said we were going to do. So that's where
we're spending our money and our time.

SCOTT
KOENIG: Yeah, I agree with you. You have to deliver. And we've been sticking
with our vision from the start. We told folks that we would be developing
multiple products in the immune oncology space. We're advancing into Phase III.
We have an ongoing Phase II study.

We're
planning two Phase I studies this year, two next year. So by the end of 2015,
we'll have six immune-oncology programs in our portfolio in the clinic.

ERIC
PIERCE: So lots of things moving. And I know you also mentioned you have cash
into 2017, which must be a luxury.

SCOTT
KOENIG: It's a wonderful luxury to be in. What it allows us to do is to focus
on execution here. It also allows us to make some decisions. For instance,
we're supplementing our manufacturing facility to keep up with the productivity
of our R&D pipeline.

ERIC
PIERCE: Jeff, we were talking earlier about just how expensive it is to develop
drugs. $100 million isn't going to last a long time. Where is Argos spending
their money, investing capital?

JEFFREY
ABBEY: Scott makes a good point in that maybe the best thing about being public
is at least you don't wake up thinking about money every morning. But then you
have to actually deliver to what you told investors that you were going to do.
And for us, it's clearly the focus on our Phase III program to hopefully get to
FDA approval as quickly as possible. But we do have the luxury of moving into
other cancer indications using our platform technology.

In
addition, we have non-dilutive money for HIV from the NIH funding. So that's
moving HIV program along, again with the same personalized immune-therapy
approach. But you have to deliver with what you told investors. Tim nailed that
one.

ERIC
PIERCE: We're in the Washington market here. Talk a little bit about how you
developed that relationship with the NIH.

JEFFREY
ABBEY: So that came out of actually our Phase I and Phase II studies. NIH was
looking for an immune-based approach to address HIV. We had generated
interesting data that showed that we could control viral load when all other
HIV immune-therapies had failed up until then.

Still,
I don't think there's another one that actually has shown it can control viral
load. So it's actually a contract with NIH. So just like they would hire Boeing
to build a jet or something, they've hired Argos to develop this HIV immune-
therapy. And we would not be in HIV if it wasn't for the NIH.

There's
absolutely no way.

ERIC
PIERCE: So it helped you move that program forward, for sure. I want to change
tacts a little bit. We're really in a global marketplace with biotech. A lot of
the value in these companies doesn't necessarily sit on the balance sheets. It
goes down the elevator and out the door.

So
let's talk a little bit about human capital and how you guys are going about
attracting capital. Tim?

TIM
MAYLEBEN: For us, we're based in Ann Arbor, Michigan, which is not one of the
traditional biotech hubs or one of the pharma hubs. So we've had to go national
for the talent to build the company. And we've taken much more of a virtual
approach. So we're 18 colleagues today, but they're all very experienced
veterans of the pharmaceutical and biotech industry.

And
we've gone, like I said, to both coasts to find these folks. And the original
Esperion, we were very integrated. Everybody was at one site. With this version
of Esperion, we have our main office in Ann Arbor, Michigan. But then we have
colleagues that are working on both the west coast and the east coast, coming
together every month to work collaboratively, but otherwise, working remotely.

It's
worked quite well for us.

ERIC
PIERCE: Sort of a virtual network, if you will. I'm running out of time on this
segment. So we're going to dig back into that when we come back, because,
Scott, I know you have some input on where you guys found your capital. And it
happened to come from another biotech company.

Next,
did Washington help our guests on their journey to the IPO market? We'll find
out.

[MUSIC
PLAYING]

SEGMENT 4

ERIC
PIERCE: We're finishing our discussion with CEOs Tim Mayleben, Scott Koenig,
and Jeff Abbey. How did Washington help you on your journey to an IPO? And
before we dig into the Washington topic, let's stay with the recruitment and
how you guys are competing with recruiting top talent for your team.

SCOTT
KOENIG: We find this is a great time to recruit talent. Obviously, as the
company has grown tremendously, advanced our programs, there's a huge
excitement in the immune-oncology space. We've taken advantage, for instance,
of consolidation that has occurred across the industry. Our new head of
clinical development came from Bristol Myers Squibb.

He
had led the charge there on their initial programs in immune oncology. And so
we are seeing that talent is coming to us. And it's coming from both coasts.

ERIC
PIERCE: And you also benefited, you mentioned earlier about the human genome
science transaction with some of those people.

SCOTT
KOENIG: Being a local company in the Maryland, Washington area, we took
advantage of the fact that the GSK acquired HGS. They were working in the
immune therapeutics antibody space. And so there was a natural evolution and
movement of these folks, which are literally a mile away, didn't have to move,
and they were coming here to help us build our company.

ERIC
PIERCE: Didn't have to move very far. So I want to change tacts a little bit.
Part of the mechanisms that the regulatory engine put in place that's gaining
capital access to Wall Street is the JOBS Act. You guys all recently completed
IPOs. Jeff, how integral was the JOBS Act?

JEFFREY
ABBEY: It was quite helpful. So I think the biggest improvement is the, test
the waters, ability to talk to investors without being publicly on file with
the SEC. And so you're able to get good investor feedback. I'm not sure how you
guys found it, but I found it to be quite helpful. You could identify investors
who are interested, you identify investors who maybe aren't interested, and you
actually get good feedback.

But
I'd be interested here what you guys.

TIM
MAYLEBEN: My experience was similar, that we were on the earlier stages of the
recent IPO wave and weren't really sure how the market was going to turn out.
And so getting that early feedback from public investors, both generalists and
sort of the core biotech IPO investors was very helpful and constructive input,
as you were saying, that what they like about the story, what they don't like,
challenges in terms of communicating our story, we were able to polish up
before we actually did see the live IPO road show.

SCOTT
KOENIG: It was not only get feedback we got, but because we had such a complex
story, we had multiple platforms, multiple product opportunities that gave us a
chance to go back to these investors several times and tell the story so that
they could really learn what we were going to execute on and how we were going to
do it. And that made a big difference. We wouldn't be able to do this in the
normal non-JOBS Act environment.

ERIC
PIERCE: So Jeff, to your point, you mentioned earlier that investors in the
first go around were confusing you with Dendreon. Did the JOBS Act help?

JEFFREY
ABBEY: I think Scott nailed it, which is that especially if you have something
where you're trying to distinguish it from other approaches or if it's a bit
complicated story, which ours is clearly, having multiple shots with investors to
allow them to dig in and spend more time is invaluable.